Economists have slashed growth forecasts for India in light of the country’s weak economic data released Friday.

The chances of India’s economy growing at much above 4% in the current financial year are looking dim, according to several independent economists who have slashed their growth projections in light of the country’s weak economic data released Friday.

Such estimates are well below last year’s expansion of 5.0%, which itself was a decade low.

On Monday, London-based bank HSBC, cut its estimate to 4.0% for the financial year through March 2014, down sharply from its previous forecast of 5.5%.

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Leif Eskesen, chief economist for India and Asean at HSBC, said heightened macroeconomic uncertainty is making consumers and businesses more cautious about spending. In addition, the steps taken by the government lately to revive growth are yet to show results, he added.

“We do not expect to see signs of recovery until the fourth quarter of the financial year 2014. Even then, the recovery is likely to prove protracted as confidence will only return reluctantly and the structural reforms will only pass through to growth very slowly,” Mr. Eskesen added.

The bank’s pessimism followed a downward projection from Japanese financial services group Nomura. On Friday they said that India would likely only grow at 4.2% instead of the 5.0% it had previously predicted for 2013/14, after the government reported a worse than expected gross domestic product figures.

The official data showed India’s GDP increased 4.4% from a year earlier, in the second quarter of the year, lower than economists’ expectations of 4.6% and falling well below figures from the first quarter of 2013 when it stood at 4.8%.

GDP is now at its weakest since the first quarter of 2009, when the south Asian economy was struggling to stave off the contagion caused by the global financial crisis.

Nomura said even the 4.4% expansion in April-June was due to a boost in government spending, which the government may not be able to sustain in the coming quarters as it is under pressure to keep its fiscal deficit, or the budgetary shortfall of revenue over expenses, in check.

“Excluding that [spending,] GDP growth would have been under 4%,” India economist Sonal Varma at Nomura said.

Between April and June, private consumption growth hit a record low, investment demand contracted and even output of services–which have been the driver of India’s rapid growth over the years—slowed, Nomura said in its note.

India’s growth prospects have taken a beating because of a slowdown in investments as businesses are facing difficulty expanding operations.

Raising funds has become more costly since the central bank introduced inflation-fighting measures which drove up interest rates.

A fall in the value of the rupee currency in recent months has further prompted the Reserve Bank of India to reduce cash availability with banks, in a bid to curb speculative trades and prop up the currency. But in the process, the steps have hurt credit availability for Indian industry.

Since September, the government has progressively sought to ease restrictions on investments, allowing overseas investors greater access to about a dozen sectors, including telecom and multibrand retail. The administration has also sought to reduce bureaucratic red-tape by fast-tracking approvals for large industrial and infrastructure projects facing delays.

But few foreign investors have taken the bait and the measures thrown out to attract them have not reinvigorated investments.

Economists say investors will take time to formulate plans, especially because of the uncertainty in the runup to the national elections that must be held by May 2014.

Nomura and HSBC aren’t the only ones to caution about India’s worsening growth prospects. France-based BNP Paribas last week published an even more pessimistic outlook, slashing its forecast to 3.7% from 5.2%.

Singapore-based DBS Bank on Monday echoed the concerns. It said achieving 5.0% full-year growth would require an average 5.2% expansion in the remaining three quarters of the fiscal year, which would be an uphill task.

“Hence, a fall back into the below-5% on the year [growth] looks more probable, warranting a revisit to our already conservative full-year estimates,” DBS economist Radhika Rao said. “A slip below the 4% mark could also be on the cards, as a worst case scenario,” she added.

However, some economists are more optimistic. They are hopeful that upbeat farm output prospects on the back of plentiful rainfall this year, benefits of a weak rupee for exports, a pick-up in investments following approvals to several large projects in recent months and improvement in the global economy, will combine to deliver more favorable outcome than anticipated.

Robert Prior-Wandesforde, an economist at Credit Suisse, said while it may be very easy to throw in the towel and cut the growth forecast, “there have been a large number of occasions, not least in India, when patience has indeed proved to be a virtue.”

For instance, in mid-2012, when virtually everyone had given up hope of ever seeing wholesale-price inflation fall or the central bank cutting policy rates further, the naysayers were eventually proven wrong, he said.

Mr. Prior-Wandesforde said the cyclical drivers of growth were more positive in the current fiscal year than they were the year before.

“All in all, while it goes without saying that the risks to our 2013/14 GDP growth forecast of 6% are on the downside, we are not ready to capitulate. The consensus could yet be surprised on the upside,” he said.

The economist’s prediction is even more optimistic than that of Indian Prime Minister Manmohan Singh, who on Friday in a speech aimed at increasing investor confidence, said that he believes India’s economy will grow at around 5.5% this financial year.

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Corrections and Amplifications: A previous version of this post wrongly stated that HSBC was based in Hong Kong. It is in fact headquartered in London. We apologize for the mistake.

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